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Indian firms on acquisition spree for ‘4th phase of tech growth’

Source | India INC

The global technology market is changing rapidly with the advent of the “fourth phase of growth” and Indian IT firms are acquiring firms globally, especially in the US, to ensure they not only remain competitive but also gain strategic advantage higher up the value chain.

Malcolm Frank, executive vice-president, strategy, Cognizant, explains the trajectory of the tech industry’s growth in terms of four key phases. 

He says: “The first wave of technology was mainframe where the IBM Global Services model was dominant. The second was the client server model (the desktop era) where companies like Accenture played a dominant role.

“The third was internet services that saw the rise of offshoring and global sourcing and the rise of companies like Cognizant, TCS, Wipro, HCL and Infosys. Now, it’s the fourth wave where businesses are becoming digital and they are seeing transformation due to use of technologies and platforms like social, cloud, mobile and analytics.”

The Cognizant executive’s assertions are backed by research produced by NASSCOM and McKinsey.

  • Mobile SystemsInvestments to grow by 15-18 per cent each year for the next decade or so.
  • Cloud Systems/SaaS model would explode from 12-14 per cent in 2014 to 30-35 per cent in 2020
  • Big Data Analytics -Expenditure on analytics will grow 28-30 per cent a year over the next decade. The growth will come from mining data for example, Tweets, ‘likes’, shared, order history. There will be more need for automation and algortihms to improve predictive models.
  • Cyber Security: As Digital Technologies proliferate the need for cyber security becomes imperative and grow and could be a $100-billion opportunity by 2020.
  • M2M & Internet of Things – This is another major driver as more automation seeps in and is expected to grow by 20 per cent each year between now and 2025.

Hence it’s no wonder that Indian companies are acquiring firms in the US to strengthen their knowledge capital and innovation quotient. Wipro, India’s third largest software exporter, is betting big on the cloud and delivering not only software as a service (SaaS) but also Business Process as a Service (BPaaS). It has recently acquired Viteos to strengthen its accounting as a service domain. Similarly, the purchase of HealthPlan Service for $460 million would enable the Bangalore-based company to take its healthcare business past the $1-billion mark.

Infosys too has been using its resources to ensure it is not left behind in the race for innovation as society and especially business in particular becomes more and more digitized. In the recent past, the software giant has unveiled a $500 million start up fund, which is being actively used to either fully acquire or buy minority stakes in companies that can enhance Infosys footprint in the latest round of technology transformation. For example, the Indian tech giant recently bought a significant minority shareholding in US start-up Whoop for $3 million to strengthen its position in the professional team sports and connected wellness markets.

Similarly, HCL technologies has in partnership with Microsoft launched an incubation centre in Redmond Washington focusing on industrial automation, remote patient monitoring and fleet management, but there will also be a variety of other apps under development. The centre will develop new methods of using real-time analytics, sensory data and rapid co-creation, the Indian software major said.

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